What to Do When a Vendor or Client Breaches Your Contract or Agreement

Contracts are supposed to give business relationships clarity and structure—but when a vendor misses deadlines or a client refuses to pay, things can get messy fast. Whether it’s a supplier delivering defective goods or a customer ghosting you on a big invoice, a breach of contract can hit your operations and your bottom line hard.

Here’s what to do if you find yourself in that position—and how to handle it without escalating into an expensive lawsuit too quickly.

1. Review the Contract Carefully

The first step is to take a breath and go back to the written agreement. Look for:

• Termination clauses

• Notice requirements

• Cure periods (i.e., a chance to fix the breach)

• Dispute resolution provisions (mediation, arbitration, or venue clauses)

Sometimes the contract itself will spell out exactly what to do next—and what you're entitled to.

2. Gather Evidence and Document Everything

Create a paper trail. This could include:

• Emails or texts discussing the issue

• Screenshots or photos

• Delivery receipts, invoices, or time logs

• Internal notes about impact on your business

This documentation will be critical whether you’re seeking informal resolution or building a formal legal claim.

3. Communicate Strategically

Before jumping to legal threats, try raising the issue professionally. This could be an email that:

• Refers to the relevant part of the contract

• States how the breach is affecting your business

• Asks for a specific action by a specific date

Often, the breach wasn’t intentional—it may have been a misunderstanding, staffing issue, or logistical snag. A businesslike tone can preserve the relationship while still protecting your rights.

4. Send a Demand Letter

If friendly resolution doesn’t work, it may be time for a formal demand letter. This should:

• Clearly lay out the breach

• Reference the contract

• Demand payment or performance

• Set a deadline and indicate possible legal action if unmet

This letter, ideally written or reviewed by counsel, can serve as a strong nudge without escalating straight into litigation.

5. Evaluate Your Legal Remedies

If the breach is serious and unresolved, you may have several options:

• Damages for financial losses

• Specific performance, forcing the breaching party to fulfill their obligation

• Termination of the agreement

Your ability to recover depends on the terms of the contract, your documentation, and how clearly the other party’s breach can be proven.

6. Consider ADR or Litigation—but Strategically

Alternative Dispute Resolution (ADR), like mediation or arbitration, can be quicker and less expensive than court. Check whether your contract requires it.

If litigation becomes necessary:

• Work with counsel to assess your leverage

• Consider whether the other side can actually pay a judgment

• Be mindful of legal costs and opportunity cost

Sometimes, the best business decision isn’t to fight—but to restructure, settle, or move on.

Final Thought

When a vendor or client breaches your agreement, your instincts might be to act fast—or to ignore it and hope it goes away. But the right response sits in between: be methodical, businesslike, and strategic. With the right documentation, communication, and legal guidance, you can protect your business without derailing it.

This blog is for informational purposes only and not legal advice. If you’re facing a contract dispute, talk to a lawyer who knows how to resolve business conflicts efficiently—before they get out of hand.